ANMI_Watch out! Your Gap is Showing

1. Dr. Prashanto Banerjee <drprashantobanerjee@gmail.com>
ANMI. Watch out! Your Gap is Showing
Dr. Prashanto Banerjee <drprashantobanerjee@gmail.com> Sat, Jan 12, 2019 at 6:03 AM
To: presi.sec@anmi.in
Cc: chairman@sebi.gov.in, gmahalingam@sebi.gov.in, madhabi.buch@sebi.gov.in,
skmohanty@sebi.gov.in, anantab@sebi.gov.in
ANMI. Watch out! Your Gap is Showing
January 12, 2019
To
Mr. Rajesh Baheti
President, Association of National Exchanges Members of India
Office No. 202, Star Hub Building No 1,
Behind ITC Maratha Hotel, Sahar Road, Andheri (East),
Mumbai – 400 059
ANMI. Watch out! Your Gap is Showing
Dear Sir,
A big shout out to the Association of National Exchanges Members of
India (ANMI). It has been very very busy recently. What with organizing
its annual international convention and simultaneously readying to raise
money to defend some of its members caught with market malpractices.
Here’s a reality check – ANMI – an agency aiming to attain self-
regulatory organisation (SRO) status does not behave thus and it ill
behoves an SRO to conduct itself thus.

2. The dope is that Securities and Exchange Board of India (SEBI), Economic
Offences Wing (EOW), Mumbai Police and Serious Fraud Investigation
Office (SIFO) are investigating few big brokerage houses for having
indulged in serious market violations on NSEL. Transgressions like false
assurance with wrongful and misleading statements leading to
enticement for investors; deliberate lapses in clearing and forwarding
functions; market capturing practices by large scale client code
manipulations; short selling on the exchanges; suspicious transactions of
funding through multiple accounts; illegal funding through NBFCs, etc
were found which are now the subject of investigations.
Brokers with reach and influence at ANMI are trying to camouflage the
issue as an industry play. They want to hide behind their association,
hinder the investigative process and protect themselves from further
inquiry and possible actions. Reading the tea leaves, it appears near
certain the action will be strict and severe. Why should the smaller sized
brokers be party to a dispute of limited interest to the association as a
whole? Why should the association protect the wrong-doings of some
of its select brokers?
A recent circular issued by ANMI in conjunction with BSE Brokers’ Forum
clearly violates the stated principles of any SRO. It shows ANMI in bad
light – that of a close club of brokers with interest only to protect the
self-interest of some. It comes out as an association keen to protect a
few of its members, even when found to have committed gross
regulatory breaches. Instead of looking at ways to step up their self-
regulatory prowess, ANMI is being partisan showing absolute lack of
commitment towards a dispute resolution process and solving investor
problems. To add to it, ANMI is trying to coerce members to contribute
to provide legal assistance for members under investigations by SEBI and
other enforcement agencies. It is considering intervening and judicial
process in support | favour of the influential brokers. Today, ANMI is
crowd-funding to protect these few top brokerage houses involved in
malpractices on NSEL. Will ANMI resort to a similar crowd-funding

3. exercise to protect over 62 brokers who are involved in the Rs 50,000
crore NSE Co-location scam?
An earnest suggestion to ANMI - if it wants to gain the status and respect
of an SRO then first and foremost what it needs to do is show concern
towards investors interests and demonstrate a zero-tolerance policy to
market abuses even by its members. It needs to illustrate by attitude and
action that it is firm and committed to clean up the industry, make it
safer for investors, win the trust and confidence of the regulators and
investors and ensure that the market grows stronger and transparent.
An integral part of an SRO’s rule making is showing brokers the mirror
when it has abused guidelines. ANMI should turn passionate about its
investor education programme, review it and introduce a program for
investors to check on their broker and their track record on market
integrity.
Compare and contrast this to how SROs in securities industries globally
are organised and conduct their operations (table below). One can find
that while the thrust and focus is for the promotion of growth of
intermediaries and development of markets there is no compromise on
enforcement of market discipline. For instance, FINRA, USA recently
took on mighty financial institutions like Morgan Stanley with a fine of
$10 million for failure to observe the anti-money laundering programme
and Merrill Lynch with a sanction of $6 million for mis-selling of IPOs. It
even went to the extent of penalizing a crypto broker for deviance in
market conduct.
Is ANMI, either on its intent or aspirations, anywhere close to this?
Possibly a pertinent theme for its forthcoming convention.
I have enclosed below a comparative chart of world’s leading SROs for
your perusal.

5. Thanks and Regards,
Yours Sincerely
Dr. Prashanto Banerjee
Cc:
1) Shri. Ajay Tyagi
Chairman, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
2) Ms. Madhabi Puri Buch
Whole-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
3) Shri. G. Mahalingam
Whole-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
4) Shri. N. S. Vishwanathan
Part-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051
5) Shri. Arun P. Sathe
Part-Time Member, Securities and Exchange Board of India,
SEBI Bhavan, Plot No.C4-A,
G Block, BKC, Bandra (East),
Mumbai – 400 051